Pakistan stocks sink over India tensions

Pakistan’s stock market opened sharply lower on Thursday, shedding more than 2,500 points amid rising tensions with neighboring India.

The benchmark KSE-100 index of the Pakistan Stock Exchange dropped by 2,584 points at the opening bell. By 10:20 a.m., the index had pared some losses but was still down 1,016 points.

The selloff followed India’s announcement to terminate the 1960 Indus Waters Treaty — a landmark water-sharing agreement brokered by the World Bank that had withstood multiple wars and decades of strained ties. The move is seen as a turning point in the already fragile relations between the nuclear-armed neighbors.

Pakistan has called an emergency meeting of its National Security Council to formulate a response.

Market analysts said the geopolitical escalation was a major dampener and warned of potential volatility ahead. However, they maintained that strong economic fundamentals could help stabilize the market once tensions ease.

India’s stock market also opened lower, with the benchmark index slipping 200 points.

Rupee slides

Meanwhile, the Pakistani rupee touched a 15-month low, losing another 13 paisa amid concerns that escalating tensions between Pakistan and India could slow economic activity.

The dollar gained nearly 13 paisa to trade at PKR 281.10—the last time the rupee traded at this level was on Jan. 17, 2024.

In addition to rising geopolitical tensions between the two South Asian countries, reports from a foreign news agency citing Fitch Ratings said the State Bank of Pakistan (SBP) might allow a gradual depreciation of the rupee to Rs295 by June 2026, further weighing on sentiment.

Since the start of the current fiscal year, the rupee has declined by 1 percent from Rs278.34 as quoted on June 30, 2024.

The rupee hit an all-time low of Rs307.10 in September 2023.

The Indian rupee also weakened, dropping eight paisa to trade around Rs85.42 to the dollar.